Private equity firm Caspian Advisors has launched a $40 million debt vehicle to invest in India and has so far garnered $10 million in commitments from development banks and India-based investors, according to the firm.
So far, Netherlands-based development banks FMO and Triodos Bank have made commitments to the fund, as well as US-headquartered GrayGhost Ventures, which also has two offices in India. Caspian has received some commitments from local investors and its promoters, bringing total commitments to date to $10 million, the firm said.
Caspian Impact Investments plans to fund companies in the microfinance, small business financing, affordable housing and food and agricultural sectors, focusing on low income or financially excluded communities.
“In India, the current supply of debt to social impact enterprises is scarce,” the firm said in a statement. “CII seeks to invest in specialised intermediaries that support these impact enterprises, building the capacity and resources of these institutions and their clients, helping to promote the growth of social enterprises in India and enabling social entrepreneurs to scale their businesses without depending entirely on equity capital or debt funding from banks, which are primarily driven by priority sector or directed lending considerations.”
Development finance institutions have ramped up their activity in India as it falls out of favour with other institutional investors. In particular, LPs are considering alternative private equity strategies such as special situations or distressed debt as many small- and medium-sized enterprises in the country struggle to refinance their often highly-leveraged businesses, industry sources tell Private Equity International.
Also in April, FMO and UK development finance institution the CDC Group invested directly in Au Financiers, an Indian non-bank finance company that provides loans to SMEs. The pair joined International Finance Corporation, ChrysCapital and Warburg Pincus as investors in the business.